One of the more costly expenses that adults have is keeping a roof over their heads. Medical issues, a divorce or the loss of a job are some of the many factors that may jeopardize your ability to pay your monthly mortgage payment and leave you wondering if your lender may initiate foreclosure proceedings. You don’t have to accept this as the only conclusion in your case. A loan modification may be a good option for you to consider.
How do loan modifications work?
Borrowers who find themselves having financial problems can ask their lender to extend their repayment terms, lower their interest rate, or change their loan type. For example, a lender may agree to forgive your principal or defer it, change an adjustable-rate loan to a fixed one, extend its terms out by ten years, or add an amount you owe onto the back end of your loan.
How do loan modifications benefit lenders?
Foreclosing on a home can be an expensive process. Many lenders see a loan modification as a win-win for both you and them. It allows you two to renegotiate your terms. You let them know what you can realistically pay at this point, and you sign on the dotted line, agreeing to make timely payments. It also saves a lender time and money associated with the foreclosure process.
What does it take to do a loan modification?
You must check with a lender to find out how willing they are to do a loan modification. They’ll generally ask that you provide proof of income showing that you spend 31% or more on housing to feel comfortable giving you this second chance to make things right. They may also ask that you make several timely payments before finalizing the modification. If you filed for bankruptcy, then know that the trustee presiding over your case must approve the loan modification before you can go through with it.
What to do if you’re facing foreclosure proceedings
It’s never too late to try and make arrangements with your lender to save your home until it’s being auctioned off. There are many different strategies, including loan modification, that an attorney can help you apply to avoid foreclosure.